Tickers in this Article: SWN, DVN, XOM, TPLM
Southwestern Energy (NYSE:SWN) plans to shift capital slightly away from the company's core Fayetteville Shale properties in 2012, while accelerating development of the Marcellus Shale. The company also plans increased exploration of its properties in the New Ventures portfolio.

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2012 Capital Budget
Southwestern Energy has set a $2.3 billion capital budget for 2012, with $2 billion allocated to the exploration and production area. The company estimates that its 2011 capital investment program will total $2.1 billion.

The company estimates that this level of spending will boost production in 2012 to a range of 570 to 580 Bcfe. This would represent production growth of 15% over 2011. (For related reading, see What Determines Oil Prices?)

Fayetteville Shale
Southwestern Energy built the company over the last decade on the extensive development of the Fayetteville Shale in Arkansas. This play represents approximately 88% of the company's total proved reserves and production.

The budgeted $1.25 billion in capital spending here in 2012 is down from $1.32 billion in 2011. These funds will be used to drill between 370 and 380 net wells in 2012, down from an estimated 436 net wells last year.

Marcellus Shale
Southwestern Energy plans to increase development of the Marcellus Shale and has allocated $590 million to drill from 65 to 70 net wells in 2012. In 2011, the company drilled only 36 net wells on its 181,500 net acre position.

New Ventures
Southwestern Energy also plans to increase spending on exploration activities in the company's New Ventures group in 2012. The company has allocated $240 million here in 2012, up $40 million from last year.

One area of the New Ventures portfolio that Southwestern Energy is focusing on is the Lower Smackover Brown Dense play in Arkansas and Louisiana. The company has approximately 500,000 net acres prospective for this oil formation and is currently completing its first horizontal well into this play.

Southwestern Energy has already spud its second well into the Lower Smackover Brown Dense play, and expects completion results from the first well in the first quarter of 2012. (Find out how to stay on top of data reports that could cause volatility in these markets. For more, see Uncovering Oil And Gas Futures.)

Other operators active in the Lower Smackover Brown Dense formation include Devon Energy (NYSE:DVN), which has 40,000 net acres prospective for the play. The company is currently working on its first horizontal well here.

Exxon Mobil (NYSE:XOM) also has exposure to the Lower Smackover Brown Dense formation and recently reached total depth on a well, according to documents filed with Louisiana regulatory authorities.

In Canada, Southwestern Energy holds just over one million acres in the Maritimes Basin of New Brunswick. The company is working on various formations here and is in the midst of a three-year exploration program.

Triangle Petroleum (Nasdaq:TPLM) also has exposure in the Maritimes Basin with approximately 475,000 gross acres in Nova Scotia's Windsor Block.

The Bottom Line
Southwestern Energy can't live off the Fayetteville Shale forever and the company is wisely shifting capital to other onshore plays in the United States. The company is also moving forward with exploration to set up for long-term growth. (Oil and gas investments can provide unmatched deduction potential for accredited investors. For more, see Oil: A Big Investment With Big Tax Breaks.)

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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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